Colombia Yields Fall to One-Week Low as Central Bank Holds Rate

Colombia’s peso bonds rose, pushing yields on benchmark securities to a one-week low, after the central bank left interest rates unchanged amid lower inflation forecasts.

The yield on Colombia’s 10 percent bonds due in July 2024 fell one basis point, or 0.01 percentage point, to 7.56 percent, according to the stock exchange. That’s the lowest level since Dec. 7. The bond’s price rose 0.085 centavo to 119.305 centavos per peso.

The central bank’s seven-member board, led by Jose Dario Uribe, held the overnight rate at 4.75 percent today, as forecast by 26 of 32 economists surveyed by Bloomberg. Six analysts expected the bank to raise the rate to 5 percent. In November policy makers raised the rate a quarter percentage point citing the need to bolster the central bank’s credibility after “strong” growth drove up inflation expectations, according to minutes of the meeting.

“Last month’s hike helped anchor inflation expectations,” said Omar Escorcia, an analyst at Asesores en Valores SA brokerage in Bogota. The central bank has “room to gauge the impact of Europe on the economy” before likely raising rates in April, he said.

The gap between yields on government inflation-indexed bonds due 2013 and similar-maturity fixed-rate debt, a gauge of annual consumer price increase expectations, fell to 3.58 percentage points from 3.91 on Nov. 17.

Colombia’s economy likely grew more than 6 percent in the third quarter, Banco de la Republica said in a statement following the rate decision. Latin America’s fifth-largest economy may grow as much as 6 percent in 2011, the central bank has said, which would make it the fastest pace since 2007.

Bank lending is expanding “at a fast pace and seems to be accelerating,” and housing costs are at a record, policy makers said in the statement.

The peso fell 0.3 percent to 1,940.98 per U.S. dollar, from 1,935.61 yesterday. The currency slipped 0.8 percent this week.

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